O'Reilly Auto Parts 2003 Annual Report Download - page 34

management’s discussion and analysis
of financial condition and results of operations (continued)
page 32
Capital expenditures were $136.5 million in 2003, $102.3 million in 2002 and $68.5 million in 2001. These expenditures were primarily
related to the opening of new stores, as well as the relocation or remodeling of existing stores. We either opened or acquired 128, 106
and 203 net stores in 2003, 2002 and 2001, respectively. We remodeled or relocated 46 stores and two distribution centers in 2003,
27 stores in 2002 and 16 stores in 2001. Three new distribution centers were acquired; one in 2003, located near Mobile, Alabama
and two in October 2001, located in Nashville, Tennessee and Knoxville, Tennessee.
Our continuing store expansion program requires significant capital expenditures and working capital principally for inventory
requirements. Our 2004 growth plans call for approximately 140 new stores and capital expenditures of $125 million to $135 million.
The costs associated with the opening of a new store (including the cost of land acquisition, improvements, fixtures, inventory and
computer equipment) are estimated to average approximately $900,000 to $1.1 million; however, such costs may be significantly
reduced where we lease, rather than purchase, the store site. Although the cost to acquire the business of an independently owned
parts store varies, depending primarily upon the amount of inventory and the amount, if any, of real estate being acquired, we
estimate that the average cost to acquire such a business and convertit to one of our stores is approximately $400,000. We plan to
finance our expansion program through cash expected to be provided from operating activities and available borrowings under our
existing credit facilities.
On July 29, 2002, the Company completed an unsecured, three-year syndicated credit facility (Credit Facility) in the amount of
$150 million led by Wells Fargo Bank as the Administrative Agent, replacing a five-year syndicated credit facility. The Credit Facility
is guaranteed by all of our subsidiaries and may be increased to a total of $200 million, subject to the availability of such additional
credit from either existing banks within the Credit Facility or other banks. The Credit Facility bears interest at LIBOR plus a spread
ranging from 0.875% to 1.375% (2.06% at December 31, 2003 and 2.26% at December 31, 2002) and expires in July 2005. At
December 31, 2003 and 2002, $20.0 million and $90.0 million, respectively, of the Credit Facility was outstanding. Additionally,
letters of credit totaling $11.0 million and $6.0 million were outstanding at December 31, 2003 and 2002, respectively. Accordingly,
our aggregate availability for additional borrowings under the Credit Facility was $119.0 million and $54.0 million at December 31,
2003 and 2002, respectively. Prior to July 29, 2002, the Company had available an unsecured credit facility providing for maximum
borrowings of $140 million. The facility was comprised of a revolving credit facility of $125 million, and a term loan of $15 million.
The credit facility, which bore interest at LIBOR plus 0.50%, expired in January 2003. All borrowings outstanding under the old
credit facility were fully repaid in July 2002.
off balance sheet arrangements
We have utilized various financial instruments from time to time as sources of cash when such instruments provided a cost effective
alternative to our existing sources of cash. We do not believe, however, that we are dependent on the availability of these instruments
to fund our working capital requirements or our growth plans.
We completed two sale-leaseback transactions in 2000 and 2001 and the Synthetic Lease in 2000, the terms of all which are described
above under Liquidity and Capital Resources. The purpose of the sale-leaseback transactions was to reduce outstanding borrowings under
our former revolving credit facility. The purpose of the Synthetic Lease was to fund a portion of our store growth, primarily in 2001 and 2002.
We issue stand-by letters of credit provided by a $20 million sublimit under the Credit Facility that reduce our available borrowings.
These letters of credit are issued primarily to satisfy the requirements of workers compensation, general liability and other insurance
policies. Substantially all of the outstanding letters of credit have a one-year term from the date of issuance and have been issued
to replace surety bonds that were previously issued. Letters of credit totaling $11.0 million and $6.0 million were outstanding at
December 31, 2003 and 2002, respectively.